Thursday, June 10, 2010

SHE WON'T EVEN BLANCHE AT THE THOUGHT

So the theory is that progressives can take heart from Bill Halter's narrow loss to Blanche Lincoln in this week's primary because it forced Lincoln to move to the left and to introduce legislation to strengthen financial reform by regulating derivatives in order to capture the base, who saw her as too close to big corporations (because that of course is true). We made her more progressive, goes the line. That's good.

Lincoln took up a hard line on Wall Street to fend off a challenge from the left. Unions and other liberal groups were backing Arkansas Lt. Gov. Bill Halter in his primary challenge. The crack down on derivatives was an attempt by Lincoln to show that she could get tough on Wall Street.

Now that the primary challenge is behind her, she may be willing to compromise on the language, according to several senior executives at banks that have been attempting to gauge the direction of the financial reform negotiations. All asked that I not name them or their companies, for fear of political backlash.

“This was all about the primary. Now that that’s done, she doesn’t need to fight for it. And without her fighting, that provision will die,” said one banker who has been in close contact with Capitol Hill and Obama administration.

The banks have several strong allies on Capitol Hill when it comes to diluting the Lincoln provision. House Financial Services Committee chair Barney Frank is not in favor of the provision. Nor is Senate Banking Committee chair Chris Dodd. FDIC head Shelia Bair and Fed chief Ben Bernanke are also reportedly opposed.

It could be the banks are gloating again because they always do. But the fact that Frank, Dodd, Bair and Helicopter Ben all hate this idea is a pretty good indication the White House isn't going to mind letting this die...and neither is Lincoln. If Lincoln's derivatives regulation really was the difference that kept her in the game in the primary and gave her the win (and it might very well be) then Arkansas got played like an Ozark Mountain Fiddle Jamboree.

But I fully expect this derivatives thing to die quietly, unremarked and not mourned a bit by those that created it. It's something progressives might want to keep in mind next time.